Lobbyists: The growing tribe of hidden persuaders who prowl the parlours of power

Lobbyists: The growing tribe of hidden persuaders who prowl the parlours of power

They are the hidden persuaders, manipulating massive arms deals and commercial contracts through carefully-cultivated contacts in government and bureaucracy. A report on the growing tribe of lobbyists who prowl the parlours of power.

advertisement

INDERJIT BADHWAR

September 15, 1986

ISSUE DATE: September 15, 1986

UPDATED: February 10, 2014 18:27 IST

The Government floats a multi-crore proposal for the manufacture of video cassettes in India. Just about every big business house applies for a licence to undertake the venture. The last date for selection - January 21, 1986 - passes by. Seven months later, no decision is made. The Uttar Pradesh Government invites private companies to collaborate in a Rs 700-crore joint sector undertaking for an aromatics plant in Salempur.

Over half-a-dozen groups apply and three of them - the Singhanias, Reliance, and the Birlas - are short-listed for final selection. Two years have passed but the state Cabinet has still not made a choice. A new Maruti dealership was to be opened in Faridabad near Delhi last month. Bidders came in droves. But the company's board, in a seemingly inexplicable move, decided to postpone the dealership.

These are examples - not of bureaucratic sloth or buck-passing but of decisions involving massive amounts of money that have been deliberately deferred in the course of the high-stakes game of lobbying that has become an integral part of the everyday affairs of this country.

In each of these cases, lobbyists and influence peddlers on various
sides have been battling behind the scenes and bringing to bear their
weight - through politicians or bureaucrats - on the officials who must
ultimately make the decisions. And the Government has responded by
setting up super committees, task forces, and expert committees which
have stymied all action while the bidders pull their weight at various
ministerial levels in an attempt to out-muscle one another.

The Ministries of Industry, Defence, Commerce and Finance exert a vice-like grip over the cradle-to-grave existence of just about every commercial enterprise in this country. Bureaucrats can help create or break the back of any business.

Lobbying - the art of winning politicians and influencing Government decisions - is orchestrated by industrial houses, trade groups and associations as well as individual businesses in a concerted effort to bag a contract, to destroy a competitor through political pressure, win an industrial licence, or help shape official policy in the interest of their own clients.

The more visible lobbies - Federation of Indian Chambers of Commerce and Industry (FICCI), Association of Indian Engineering Industry (AIEI), Federation of Indian Export Organisations (FIEO), the Apparel Export Promotion Council - are highly organised and well-financed groups that use a mixture of seminars, formal representations and personal persuasion to wrest trade concessions in the marketplace from a Government which controls not only the commanding heights of the economy but also straddles trade and commerce in the form of a bureaucratic colossus.

Within these lobbying organisations themselves, there is fierce competition for the top posts by the industrialists who, by virtue of occupying these positions, stand to gain access to Government officials and ministers to seek favours for their personal businesses.

Ultimately, it is the Government's control over expenditures that is one of the key reasons for the existence of the lobbies. More than Rs 40,000 crore are spent annually by government agencies on the purchase of items ranging from a sophisticated fighter plane to letter writing paper. The ministries of industry, electronics, communications, commerce, defence, and finance have a vice-like grip over the cradle-to-grave existence of just about any commercial enterprise in this country.

The Department of Industrial Development alone clears more than 2,000 applications for new projects each year. The Commerce Ministry - through a system of clearances, permits, and concessions - oversees more than Rs
28,000 crore in trade annually. Bureaucrats in the various departments
of these ministries can help give birth to a new enterprise, break the
back of an existing one, or delay the functioning of a nascent one.

The Controller of Capital Issues, a joint secretary in the Finance
Ministry, is solely responsible for multi-crore decisions involving the
issuance of shares and debentures in the Indian market-place. And the
joint secretary, banking, a man with an innocuous sounding title, is
really the czar before whom all bank chairmen quake and tremble because
the edicts he issues decides their careers.

Without a doubt, the most powerful group within this configuration is
the Finance Ministry which can torpedo by holding up money - decisions
made by other ministries. The most powerful bureaucrats within this
ministry - a handful of joint secretaries - sit within the Department of
Economic Affairs. They collect data and make what are euphemistically
called "notations on files." But these "notations", mostly terse and
scribbled in ink, can pack a deadly punch.

"These notations," says a
long-time FICCI member, "can make or break a file. They can be very
subtle, very brief, but the effect can be felt in hundreds of crores. A
little weight given to one project, a little criticism directed at
another can decide the fate of the entire industry."

Each
proposal to the Government is processed by over half-a-dozen officials
within a ministry plus another set of officials in another ministry if
the matter is relevant to both. If the proposal involves any policy
change, the file travels from the section officer to the minister, and
in some cases to the Cabinet for final approval.

The file for an
industrial licence is handled by more than 50 officials before any
action is taken on it. Says Gaur Hari Singhania, chairman of J.K.
Synthetics: "To chase this phalanx of clerks we have our own people who
understand their culture and language. You may call it lobbying but we
think it is legitimate. It is better to chase your way up than to be
stranded at the bottom."

The file for an industrial licence is handled by more than fifty officials before any action is taken on it. "To chase this phalanx of clerks and officials," says an industrialist, "we have our own people who understand their culture and language."

The J.K. group maintains a battery of officials whose only job is to
religiously report to Delhi's Udyog Bhawan and North Block every day and file a status report for their bosses. Other groups like the Tatas and
Birlas, as well as multinationals like Hindustan Lever and Siemens,
maintain "follow-up" departments headed by senior officials with the
rank of a regional director or vice-president.

The multinationals sometimes call their officials 'development officers'. They enjoy
virtually unlimited expense accounts and maintain luxury guesthouses,
five-star hotel suites and fleets of cars exclusively for the use of
civil servants and politicians. Reliance, for example, operates through
vice-president V. Balasubramaniam, whose main function is to chase
Government officials and ministers for getting the company's projects
cleared.

Bombay Dyeing's prepossessing Chairman Nusli Wadia handles these jobs by himself, with the help of both ruling as well as opposition MP's. The
Tatas are represented by the polished and aggressive Delhi-based Surjit
Gupta, while Aditya Birla has an able representative in the
safari-suited B.N. Saxena. R.P. Goenka who once had a hot-line to the
Government via R.K. Dhawan and Pranab Mukherjee during Mrs Gandhi's
heyday, now uses his crucial position as FICCI president to establish
rapport with the most important Government functionaries.

With the recent spurt in foreign deals, there have come to the fore
several influential people not usually associated with business. For
example, cricketer Mansur Ali Khan Pataudi's company initiated the
process whereby a Gulf-based industrialist obtained the contract for the giant Jagdishpur fertiliser plant.

And last year, the portly and affable Ranjit Jayratnam, son of a former Union minister, used his
super-salesmanship on behalf of Airbus Industrie, which eventually
bagged an order for Airbuses worth Rs 1,600-crore from the country's
domestic airline, Indian Airlines. In this case the Government reversed
an earlier decision to buy the aircraft from Boeing.

Some of the
capital's exclusive bungalows in South Delhi are the venues for lavish
parties thrown by powerful Indian and foreign lobbyists. Their mansions
serve as the rendezvous for bureaucrats, businessmen, civil servants,
journalists and politicians. Some of the regular party-givers are
enterprising MP's like Suresh Kalmadi, the former air force
officer-turned-politician, and Murli Deora, the Bombay-based man for all seasons.

In Friends Colony, Ottavio Quattrochhi, who has very successfully
represented the Italian company Snamprogetti in India for about two
decades, is known for his closeness to the Gandhi family as well as for
the excellent rapport he enjoys with senior Government officials.
Another lobbyist, sought after by the large hotel chains as well as by
the Tatas, is the politically active lawyer Lalit Bhasin, who is
well-connected with the bigwigs of the ruling party.

The
bureaucrat most courted by lobbyists in all the ministries is the joint
secretary. As a general rule, he is the most powerful figure in the
world of delegated policy making. Above him, the officials are often too busy to be accessible. Below him, policy decisions don't usually get
taken.

The joint secretary sits on the boards of public sector companies,
sanctions foreign exchange for every conceivable purpose, runs the
industrial licensing secretariat, sits on the small committee that takes oil import decisions, and is responsible for vetting every proposal for a contract. "The joint secretary's notations on any file," says a
lobbyist for the export industry," are key to the movement of any
project and even more important than what his secretary does." A
secretary will rarely overrule a joint secretary on paper.

Influence peddlers on various sides fight behind the scenes and bring to bear their weight - through politicians and bureaucrats - on officials who must ultimately make the decisions. Government responds by setting up expert committees.

A key office
for company lobbyists is the Directorate General of Technical
Development (DGTD), within which relatively junior development officers
are assigned responsibility for the various industries.

These officers
can sometimes be more important than almost anyone else, for before any
licence is issued, the DGTD makes an extensive evaluation of the
proposal in order to determine its "viability", the demand for the
product, the estimated lag in supplies, how many licences should be
issued, and whether foreign components should even be allowed into the
country. A small display of disapproval for even a miniscule portion of a project under consideration can sound its death-knell.

In one
case recently, the Government said that the minimum economic size for
units in the chemical industry should be 60,000 tonnes. Earlier, the
technical recommendation had been 50,000 tonnes. Some company lobbyist
who wanted to expand capacity had obviously been at work. When an
objection was raised, the change was explained away as a typing error.
But the "typing error" has still not been corrected.

The office of the Director General of Supply and Disposal (DGSD) is
another important hang-out for the influence peddlers. As part of the
Ministry of Supply, this department approves the rates at which the
Government will buy items like steel, water-pipes, clothes, and consumer and office items.

The DGSD's stamp of approval for the rates
charged by a company enables it to sell to Government agencies without
going through formal tender requirements. Since these agencies buy Rs
3,000 crore worth of goods at DGSD rates, lobbyists work day and night
to get their own rates approved. And often the lobbying is aimed at
profiteering through this mechanism. When V.P. Singh was commerce
minister, he ordered an inquiry into why the DGSD had approved rates
that were higher than those prevailing in the market - for the sale of Rs
50 crore worth of water-pipes.

A new entrepreneur functioning without the aid of a lobbyist is like a
babe in the bureaucratic woods. Consider what he has to go through to
start a project: he must first submit a detailed preliminary project
report that usually runs into a score of pages, not counting the
supporting affidavits and supplementary forms which must be appended to
it.

The applicant must obtain a "letter of intent" issued by the
ministry, by filling out more forms spelling out the scope of the
project, the raw material and components to be used and the
capitalisation plans, which are evaluated by several technical wings
within the pertinent ministries.

In this continuing process,
which can take years,the application goes to the licensing committee
within the Secretariat of Industrial Approvals (SIA). A committee within the SIA will meet in order to determine whether approval should be
given for the letter of intent. Several steps later, the letter of
intent will be converted to an industrial licence.

The capital's exclusive bungalows in south Delhi are the venue for lavish parties thrown by powerful Indian and foreign lobbyists. Their mansions serve as the rendezvous for businessmen, civil servants, journalists and politicians.

The
entrepreneur must also begin a new round of negotiations with
Government-owned financial institutions - Industrial Finance Corporation
of India, Industrial Development Bank of India, Industrial Credit and
Investment Corporation of India - each with its own rules and
regulations - to arrange for loans, and with state governments to
arrange for land.

It is small wonder then that most industries
employ armies of lobbyists just to keep track of their business
proposals as they wind their way tortuously through the labyrinthine
corridors of Government. The Apparel Export Promotion Council, the
lobbying arm of India's nearly 8,000 garment exporters consists of three directors from the Government and 27 directors from the industry and
has compiled a war chest - from membership donations - of Rs 20 crore to be
spent on promotional activities.

But Ultimately, tricky decisions on trade, commerce and industry,
particularly those with a potential political fall-out, are usually
handled by officials close to the prime minister. In Mrs Gandhi's time, a cabal in her office including Yashpal Kapur and R.K. Dhawan dispensed
favours freely to chosen industrialists by short-circuiting or
strongarming the bureaucracy. In more recent times, the battle royal
between the London-based businessman Swraj Paul and H.P. Nanda of
Escorts - the battle between the NRI lobby and FICCI - was informally
arbitrated in the Prime Minister's Secretariat.

Because of this
over-centralisation of decision-making, interest groups failing to
influence Government decisions through the traditional methods of public relations and liaison work resort to opening up new fronts - pressure
points - at the political level in order to reverse decisions already
made.For example, after interminable haggling between highly-connected
French and Italian lobbies in this country, the Government decided to
award the Rs 722-crore contract for the HBJ pipeline deal to an
international consortium led by the French company Spie Capag.

This created conflicting camps even within the Prime Minister's
Secretariat. One powerful lobby, backing the Italian competitor,
Snamprogetti, wasn't about to give up without a fight. There is no way
to revise a Government decision except at the Cabinet level. But in this case, a committee headed by the then cabinet secretary, P.K. Kaul, was
assigned to take another hard look at the contract. This committee did
not reverse the initial decision.

And, before Kaul could complete his term as cabinet secretary, he was sent to Washington as ambassador. Two other powerful men who were dealing with the pipeline decision - Minister of State for Petroleum Nawal Kishore Sharma and Gas Authority of India
Chairman B.S. Cheema - also lost their jobs.

But Government
decisions - under pressure from powerful political lobbies - have been
reversed in the past. The most notable example of this was the reversal
of the decision, in 1981, to award a large fertiliser technology
contract - partly funded by the World Bank - to the California firm of C.F.
Braun.

Ignoring the Government committee's endorsement of the scheme, Mrs
Gandhi appointed yet another special cabinet committee which recommended that the project be awarded to Haldor Topsoe, a Danish subsidiary of
Snamprogetti. In another interesting instance, the Janata Government
plumped for the British Jaguar aircraft, but as soon as Mrs Gandhi
returned to power she aborted the Jaguar deal midway and plumped for the French Mirage.

politicians not only work for special interests through ministries but also lobby for competing businesses through Parliament. Some MP's ask repetitive questions about the same business group in a single session of Parliament with uncommon frequency.

Most politicians, adept in the art of lobbying,
rarely like to leave behind a paper trail leading to the
favour-seeker. A minister will usually fire his gun from the shoulder of a joint secretary or secretary. If the bureaucrat doesn't agree to play along, he will be shunted off to a do-nothing job. The traditional role of the bureaucrat was to protect the Government or his minister from
embarrassment or from being publicly compromised.

But with the advent of big bucks, big deals and big lobbyists, these
distinctions have become hazy. Ministers want their dirty work done, but they are averse to over-ruling their secretaries in writing. And,
increasingly, bureaucrats do not write dissenting opinions. "Today, what makes a successful bureaucrat," says an official in the Prime
Minister's Secretariat, "is his ability to manipulate a politician and
keep his mouth shut. They now emulate the skills of a politician, knowing that there will be prize jobs waiting for them at the end of it all." Indeed, while old Government files had reasoned arguments going
back and forth, most today have brief notings that say "Please speak" or "As discussed". So no record is left of what really went on.

Politicians not only work for special interests through ministries but openly lobby for competing businesses through Parliament. Some MP's ask questions
about the same business group in a single session of Parliament with
uncommon frequency. A large number of politicians continue to hold the
same jobs they had with companies prior to their becoming MP's or MLA's. During the last Parliamentary session, the domestic soft drinks lobby
was clearly on the attack in order to embarrass the Government over its
proposed deal to allow Pepsi Cola to manufacture its product in India.
Earlier this domestic lobby had been at loggerheads as both the Campa
Cola and Parle groups attempted to use Parliament to raise embarrassing
questions about each other.

Interestingly, between 1979 and
1982 about 15 MP's asked 86 questions against the Parle group of
companies. Fifty-six of these questions were posed by three MP's - K.
Lakkappa, Dharam Das Shastri, and J.K. Jain. Later, Parle responded in
kind. Till recently, a Rajya Sabha member with financial connections to a drug company in Bombay specialised in asking embarrassing questions
about market rivals Glaxo and Pfizer. And another seemed to have
interest in little other than the affairs of tobacco giant ITC.

Industrial houses will often seek to influence an MP or MLA during an election
campaign. During the last elections, for example, the Khoday group
favoured the victory of Janardhan Poojari from Karnataka. Poojari won
and went on to become minister of state for finance. In a neighbouring
district, a rival of the Khoday group - Vijay Mallya of United Breweries -
was backing S.M. Krishna, who lost. Mallya, who has been a subject of
investigation, has alluded that he is a victim of his rivals' political
connections.

Mallya himself, however, attempted to use another
political connection to his advantage. Last August, when he was in
trouble with the authorities over the Shaw Wallace take-over
controversy, an MP from Madhya Pradesh, Shivendra Bahadur Singh, wrote a personal letter to Rajiv Gandhi pleading Mallya's case. Singh, a Doon
School mate of Rajiv, wrote that the charges against Mallya appeared to
be false and were instigated "by an industrial lobby of the Poddars and
Goenkas".

In that letter, Singh pointed out: "Vijay and his
group...have contributed to the party (and) he is also helping the
promotion of the Indian public school cause...and also establishing a
scholarship for Doon School..."

A classic case of an
industrialist currying favour with a political candidate and chalking up a big IOU in return is that of a Bombay businessman who supplied fuel
for Mrs Gandhi's aircraft and helicopter travels during the 1980
elections that brought Mrs Gandhi back to power.

After interminable haggling between highly-connected French and Italian lobbies in the country, a government decision was made to award the Rs 722 crore HBJ pipeline contract to an international consortium led by the French company Spie Capag.

The Petroleum
Ministry then had put a strict ban on the supply of aviation kerosene
because of its short supply, and had turned down several requests from
Mrs Gandhi's aide. Yashpal Kapoor, for supplying it. The Bombay
businessman managed to locate and buy the fuel privately in the Gulf and have it shipped to Mrs Gandhi's campaign helicopter. He went on to
prosper more than anyone else once Mrs Gandhi was in power.

One
of the most common uses of powerful lobbies is to chalk out niches in
the market-place, to ensure monopoly contracts, or destroy competitors
through political manipulation. For example. India buys about 25
million tonnes of coking coal a year at Rs 42 per tonne for the Steel
Authority of India Limited (SAIL). For the past several years, a company
supplied coal from Australia. The arrangement was considered reliable.

This year, under pressure from lobbyists for a new company, the testing of
the old company's coal supplies was delayed for four months and then
rejected at one testing ground even though the same coal had been
approved at another testing ground. When the old company filed an
appeal, the SAIL authorities asked its officers to negotiate a deal
under new contract terms. But even though bidding was to occur under new terms the coal from the new company - supplied under the old terms - was
accepted. In the war of the coal lobbies, the old company lost out.

There is also the case of India's insurance companies, which for the last 32
years have been conducting their reinsurance business in the Lloyds
market in London through three exclusive brokers. So powerful is this
link - backed by politicians and high officials - between the Indian
companies and the three brokers that no other broker has been allowed to bid for business in 32 years. Due to this set pattern, the London
market offers skyrocketing premiums to the Indian market because the
business can only be placed through the three brokerage houses which
have divided the business among themselves.

In order to prevent
special interest favours, conscientious bureaucrats try and protect
their ministerial bosses from the impact of organised lobbies by not
allowing industry and trade representatives to meet them on a one-on-one basis. In Rail Bhawan, for example, there is a hard and fast rule that
no foreign delegations or their representatives will be allowed to meet
the minister of state for railways unless there is at least one joint
secretary present. "But they can always find a way to get through,
through a sister or a brother or an aunt," says a Government official
who has worked for several ministries.

"The relationship starts
with small presents. But once a contact is established it continues. I
am always amazed to see how easy it is to win over ministers with small
presents. And soon, the lobbyist finds that a minister or a Government
official is working for him, not as a lackey, but as a friend."

On Diwali and Christmas, the corridors of Government offices crawl with
lobbyists bearing gifts - pens, designer glasses, calendars, brief-cases,
diaries. But these are the smallest items at which this public relations effort begins. The diaries and pens get more expensive when they are
meant for senior officials. Leather brief-cases, cut-glass ashtrays and, table pen-sets are commonplace gifts for senior officials.

Then, of course, there is the time-honoured custom of sending sweets and
fresh fruit baskets to officials on Diwali and Holi: the higher-placed
the recipient, the bigger the basket. And beneath the yellow
cellophane-covered fruit are layers of dry fruits and bottles of Scotch
whisky. Says a senior bureaucrat: "You can get more information out of a bureaucrat by serving him a bottle of Scotch whisky than by giving him
Rs 1 lakh. The former makes him feel he is among friends and he blabs
out the details wanted."

The other common method of getting
bureaucrats beholden is to bear their and their family's holiday
expenses. All bureaucrats are entitled to take their LTC once in two
years, and when they do, they go to a holiday resort where they are
generously looked after. The same thing happens on foreign trips too.

Some of the biggest deals, naturally enough, are struck on the golf course.
Money literally changes hands, but in a very legitimate way. The
lobbyists who flock to the golf course have acquired a knack of losing
to the senior officials they are trying to befriend. The technique is
ingenious. They carefully note the habits and times that senior
officials play, arrive at the same time, and lay large wagers with the
officials.

They play badly and intentionally lose to the
officials. As a result, the officials are always winning money from
these lobbyists, who become known more for their high wagers than for
their golfing ability. Thus are born some of the strangest foursomes on
the greens. And it is during these games and over the inevitable beer or whisky which follows that important nuggets of information are
obtained.

"Lobbyists keep extensive profiles and dossiers," a
Finance Ministry official says. "There is rarely a false move. They know who takes money, who has greedy relatives, who dines with whom." A
prominent Congress(I) politician - who made his fortune as a lobbyist for
the electronics industry as well as for competing big business houses in both Delhi and Bombay - has perfected information-gathering to a fine
art. His organisation keeps a special who's who directory of officials
in Government departments and ministries who can always be counted on
for a quick favour.

Several servants in the Maharashtra state
guesthouse are on his pay-roll. They eavesdrop on guest-house telephones and keep a tab on visiting VIP's. They know - and report back on - who
calls whom, who meets whom and who is who's relative. A Rajiv Gandhi
intimate who stayed there recently was shocked to discover that a
prominent lobbyist knew the names and financial and private businesses
of every member of his family soon afterwards.

That particular
lobbyist has a permanent suite booked at a leading five-star hotel in
Delhi. Every Diwali, he sends 2,000 packets of export-quality
suit-lengths and 3,000 Banarasi saris to influential contacts.
Brand-specific whisky bottles and Cartier watches are delivered to
newspaper editors. In Bombay, he has organised some 25 ethnic
associations of workers from different regions who live there to welcome - and influence - visiting politicians from those areas.

There is,
for example, the Garhwal Association which recently welcomed Industry
Minister N.D. Tiwari in Bombay - to his pleasant surprise - to the singing
of Garhwali folk-songs. But such festivities have a purpose, for at the
appropriate moment one person from the association - usually by prior
arrangement - is chosen to approach the minister and ask him for a favour
which will ultimately benefit the lobbyist's client.

The game is played out day in and day out - the hustle, the shuffle, the fix, the political twist, the con deal, the artful arm twist - in which the big fish eats the little fish in a scenario where only the jungle law operates.

The minister never suspects that behind the "leader" of this ethnic group is a master hidden persuader at work. When H.N. Bahuguna was campaigning from Garhwal in 1982, the Garhwal Association sent 500 letters home to their families asking them not to vote for him. Copies of these letters were shown to Tiwari in order to impress him. And so the game is played out, day in and day out - the hustle, the shuffle, the fix, the political twist, the con deal, the artful arm twist - in which the big fish eats the little fish.

There are no other rules, for what is being acted out - in a world in which Big Government and Big Business hold each other captive in a symbiotic embrace - is an amoral morality play in which the only spiritual barometer is how much and how quickly the players can grab a chunk of the Indian economic pie. The only moral, ultimately is: You take your money. You run.

- with Prabhu Chawla and Raminder Singh

Get real-time alerts and all the news on your phone with the all-new India Today app. Download from